Horizon Technology Finance(US:HRZN)2020-03-04 19:47Financial Data and Key Metrics Changes - In Q4 2019, Horizon earned total investment income of $13 million, a 47% increase from $8.8 million in the prior year period, primarily due to higher interest income from a larger loan portfolio and increased prepayment fees [47] - Net investment income (NII) per share for Q4 was $0.43, compared to $0.42 in Q3 2019 and $0.34 in Q4 2018 [52] - The company's net asset value (NAV) as of December 31 was $11.83 per share, up from $11.67 at the end of Q3 2019 and $11.64 at the end of Q4 2018 [55] Business Line Data and Key Metrics Changes - Horizon funded 7 new loans totaling $65 million in Q4, increasing net debt investments by $34 million from September 30 [15] - The debt investment yield for Q4 was 17.6%, slightly down from 17.7% in Q3 but up from 16.7% in Q4 2018 [48][22] - The company maintained a premium yielding debt portfolio, with an onboarding yield of 12.2% in Q4, up from 11.9% in Q3 [48][21] Market Data and Key Metrics Changes - The venture capital environment saw approximately $34 billion invested in VC-backed companies in Q4 2019, with a total exit value of $19 billion for the quarter [35][33] - Health care and life science sector IPOs continued to dominate the overall IPO market, contributing to a record-breaking total exit value of $256 billion for the year [35][36] Company Strategy and Development Direction - Horizon aims to grow its venture debt portfolio while ensuring the stability of its credit profile, with a focus on technology, health care tech, and life sciences [17][19] - The company plans to leverage its strong capital position and lower cost of capital to enhance portfolio growth [41] - Horizon will not commit additional capital to its joint venture, opting instead to focus on transactions on its balance sheet [111] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to grow the portfolio and achieve NII exceeding distributions, supported by strong demand in target markets [17][19] - The ongoing coronavirus epidemic and U.S. election year distractions were noted as potential risks that could impact investor confidence [42] - Management emphasized a cautious approach to new investments, particularly in light of the uncertainty surrounding the coronavirus [88][116] Other Important Information - Horizon declared monthly distributions of $0.10 per share for April, May, and June 2020, along with a special distribution of $0.05 per share payable in April [54] - The company ended 2019 with a record-high investment portfolio of $320 million, consisting of debt investments in 35 companies and warrant and equity positions in 75 companies [57] Q&A Session Summary Question: What drove the dividend from the JV this quarter? - The dividend was driven by prepayments totaling about $10 million, which contributed to accelerated income [64] Question: Can you provide more color on the non-accrual this quarter? - The non-accrual was due to concerns about the company's ability to raise capital and execute strategic opportunities [66] Question: Are there any companies in the portfolio with direct or indirect exposure to the coronavirus? - Most companies are in development stages and not directly impacted, but some have supply chain issues [72][76] Question: Are you seeing changes in demand from portfolio companies to take on more debt? - Discussions indicate continued support from investors, and there is no immediate risk to the portfolio [82] Question: How are you evaluating deploying new capital given the uncertainty of the coronavirus? - A cautious approach is being taken, with a focus on the long-term development stages of portfolio companies [116]